Cumberland

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Cumberland Metal Industries – Decision Sheet
Objective: To devise a pricing strategy which would allow Cumberland to extract maximum value in the first year and later operate at expected margin Estimation of Market Size
Number of feet of driven piles*| 290000000| 390000000|
Amount of feet per set (1)| 10000| 10000|
Amount of feet per set (2)| 20000| 20000|
Number of pads per set| 5| 5|
Market size (1)| 145000| 195000|
Market size (2)| 72500| 97500|

Value provided
| Fazio| Colerick|
Cost of using Asbestos per 10000 feet ($)| 1666.7| 667|
Time saved every 10000 feet in piling (hrs)| 12.5| 16.7| Time saved every 10000 feet in pad change (hrs)| 13.8| 4.4| Cost per hour to contractor ($)| 386.75| 386.75|
Value of time saved per 10000 feet ($)| 10180.1| 8138.9| Total value offered per 10000 feet ($)| 11846.8| 8805.6| Value offered per pad ($)| 2369.4| 1467.6|

Apart from the savings for the Contractor, Metal cushion pads will also provide a replacement for asbestos which has well publicized health dangers as well as provide with safety for laborers due to its low temperature of 250 F. Cost to Company

Cost heads| Value|
Variable cost ($)| 69.18|
Depreciation Cost per unit ($)| 5|
Interest Cost per unit ($)| 3.75|
Net Cost ($)| 77.93|
Contribution margin| 50%|
Sales and Distribution margin| 40%|
Price as per costing ($)| 779.3|

Action Plan
* Price a pad averaging it between the cost and the value it offers i.e. $1,120. * Target sales and capacity of 18,000 pads in the first year with an investment of $425,000 ($50,000 for the first 250 and $75,000 for additional 250 per month). Return on Investment is 3000%. * Publicize the value it offers to the rental companies as they form a major class of influencers. The revenue loss of rent and asbestos sale for a 10,000 feet job comes out to be $2,183 which is more than covered by the extra 40% margin on sale of...
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